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2016 Annual Report

Sustainable Efficiency and Profitability

Contents

1 General Information4 Corporate Profile, Vision, Mission, Strategies, Corporate Values5 The Quality Policy of Halk Sigorta 6 Milestones in the History of Halk Sigorta8 Overview of the World and Turkish Insurance Markets and Future Expectations14 Message from the Chairman16 Message from the General Manager18 The Company’s Organization, Capital and Shareholding Structure20 Board of Directors22 Senior Managers23 Information on Management and Personnel26 Research and Development Activities of the Company27 Summary Board of Directors Report29 Key Financial Indicators32 Premium Production by Branches34 Premium Production by the Turkish Insurance Industry36 An Assessment of Technical Accounts in 201650 An Assessment of Non-technical Accounts in 201651 Information on Financial Structure 53 Balance Sheet as of 31 December 2016 58 Statement of Income for the Year Ended 31 December 2016 61 Statement of Cash Flows for the Year Ended 31 December 2016 62 Statement of Changes in Equity for the Year Ended 31 December 2016 64 Profit Distribution Table for the Year Ended 31 December 2016

Annual Report 2016 Halk Sigorta 1

General Information

Reporting Period: 2016 Annual ReportCorporate Title: Halk Sigorta A.Ş.Website: www.halksigorta.com.trTrade Registry No: 419740Central Registration System No: 0-1780-0293-5600012

Head Office, Regional Offices Directory

Head OfficeHalide Edip Adıvar Mah. Darülaceze Cad. No: 23Şişli/İstanbulTel: +90 212 314 73 73 Fax: +90 212 314 73 64Call Center: 444 1 545Website: www.halksigorta.com.trE-mail: [email protected]

İstanbul Regional Sales DirectorateBankalar Cad. No: 25 K: 2 Karaköy/İstanbulTel: +90 212 254 52 85 Fax: +90 212 254 50 68Email: [email protected]

Anatolia Regional Sales DirectorateOsmanağa Mah. Söğütlüçeşme Cad. No: 11 Kat: 5 Kadıköy/İstanbulTel: +90 216 330 39 51 Fax: +90 216 337 62 73Email: [email protected]

Aegean Regional Sales Directorate860. Sok. No: 2 Ağahan İşhanı Bağımsız Bölüm No: 301-302 Konak/İzmirTel: +90 232 441 36 46 Fax: +90 232 441 91 01Email: [email protected]

Antalya Regional Sales DirectorateKırcami Mah. Avni Tolunay Cad. Bal İş Merkezi No: 123/A Muratpaşa/Antalya Tel: +90 242 316 70 12 Fax: +90 242 316 70 32Email: [email protected]

Ankara Regional Sales DirectorateCinnah Mah. Göreme Sok. Nazmi Bey İş Merkezi No: 1/20 K: 4 Kavaklıdere-Çankaya/AnkaraTel: +90 312 310 11 11 Fax: +90 312 310 45 45Email: [email protected]

Adana Regional Sales DirectorateDöşeme Mah. Karaisali Cad. Baysan İş Merkezi K: 4 Seyhan/AdanaTel: +90 322 459 94 88 Fax: +90 322 459 94 87Email: [email protected]

Bursa Regional Sales DirectorateKırcıali Mah. Fevzi Çakmak Cad. Kayalı Sok.No: 36 K: 2 Osmangazi/BursaTel: +90 224 221 11 30 Fax: +90 224 221 16 15Email: [email protected]

Trabzon Regional Sales Directorate Kahramanmaraş Cad. No: 32 Ortahisar/TrabzonTel: +90 462 332 32 57Fax: +90 462 326 24 31Email: [email protected]


added value


We are creating added value for all our stakeholders by strictly adhering to our accurate strategies and rational production policies implemented in order to rank high in the industry.


Corporate Profile, Vision, Mission, Strategies, Corporate Values

Our VisionBeing one of the longest-established insurance companies, to rank among the sector’s leaders achieving profitable growth while strictly adhering to our principles of being reliable, pioneering and innovative, and supporting the propagation of insurance awareness.

Our Mission• To streamline and enrich

life, and ensure its continuity, for individuals and corporations through individual and corporate assurance solutions.

• To sustain good quality service.

• To guarantee customer, shareholder and employee satisfaction.

Corporate ValuesTo uphold the principles of customer focus, innovativeness, reliability, dynamism, rationalism, productivity, sensitivity, awareness of social responsibility and sharing, and abide by these values in every stage of our operations.

Strategies• To offer tailor-made

product options along with the traditional insurance activities;

• To offer privileged products especially to individual customers and SMEs within the scope of customer and risk segmentation;

• To adopt customer-focused and quality approach to service;

• To ensure efficiency in all work processes for the purpose of diversified product designs, process and system security, fast and quality claim payments as well as creation of a competitive structure;

• To ensure continuous improvement and motivation of employees within the frame of performance management systems.

Corporate ProfileHalk Sigorta generated TL 1,035 million in total premiums in 2016, up by 36.72% year-on, bringing the Company 2.92% market share among non-life insurance companies. In the breakdown of the Company’s portfolio, land vehicles liability takes the top rank with 57.77%, followed by fire and natural disasters with 17.65% and land vehicles with 13.40%.

Halk Sigorta pursues its operations across the country through eight regional offices two of which are in Istanbul. The Company had 244 employees on its payroll as at 31 December 2016.

Halk Sigorta’s target for 2017 is to achieve growth on the principles of profitability and productivity, and continue offering quality service in the sector.


The Quality Policy of Halk Sigorta

Halk Sigorta carries out insurance and reinsurance activities in non-life branches in accordance with the criteria set out in its quality policies.

The quality policy of Halk Sigorta is:

• To be able to offer a variety of the most appropriate, the most preferred economic products and services, and to be the most preferred, admired company that is able to achieve 100% customer satisfaction in the insurance sector.

• To increase its production in the bancassurance channel by improving technological infrastructure, and to aim to rank among the top five companies in bancassurance in a certain time frame, while also increasing its market share in the agencies channel.

• To create new and profitable fields for its agencies, brokers and bank channel through developing customized products that are innovative, cater to its customers’ real needs and expectations, are positioned on the basis of customer segments and sectors, and are aligned with its quality and profitability policies, as well as through keeping a close eye on the market.

• To decrease sales and operational costs and to increase productivity.

• To achieve sustainable growth, profitability, and progress.

• To be guided in its actions by the principle of steering and managing its organization based on a customer-focused approach to service.

• Consolidating the support of one of Turkey’s biggest public banks, Halkbank, with its professional management, experienced team, superior technical infrastructure and strong sales channels, Halk Sigorta rapidly moves ahead, committed to transform itself from a small, profitable business to a big, profitable company recognized in the global markets.


Under the leadership of Türkiye Halk Bankası A.Ş., it was founded as the first and only cooperative company in the field of insurance with the participation of Merchants and Craftsmen Guarantee Cooperatives and more than 50 merchants and craftsmen.

Milestones in the History of Halk Sigorta

Founded with an initial capital of TL 50,000 and with a paid-in capital of TL 30,000, Birlik Sigorta Kooperatifi (Union Insurance Cooperative) was converted into a joint stock company in 1997 and its capital was raised to TL 1,000,000,000,000.

CapitalHalk Sigorta raised;· its authorized capital

• from TL 30,000,000 to TL 60,000,000, which was registered on 17 April 2007, • and then to TL 150,000,000, which was registered on 17 July 2012;

· its paid-in capital • from TL 29,509,477 to TL 40,000,000, which was registered on 29 April 2009, • then to TL 70.000.000, which was registered on 21 March 2013, • then to TL 94,000,000, which was registered on 01 July 2014,• and most recently to TL 129,000,000, which was registered on 15 July 2016

Registered with the Capital Markets Board of Turkey, Birlik Sigorta A.Ş. transferred its life insurance business to Birlik Hayat Sigorta A.Ş., which was established the same year.

İstanbul, Adana, Elazığ and Antalya Regional Offices were set up in addition to Ankara and Aegean Regional Offices.

Samsun and Bursa Regional Offices were set up, marking the inception of the countrywide network of regional representation offices.

1958 1997 1998 1999 2000


2009 20102005

Halkbank increased its shareholding to 89.18%, thus becoming the controlling shareholder in the Company. The remaining 10.82% interest was being held by the Merchants and Craftsmen Guarantee Cooperatives, professional chambers and real persons.

Based on an Extraordinary General Meeting Resolution ratified at the Company’s Extraordinary General Meeting convened on 27 December 2010, which was registered with İstanbul Trade Registry on 30 December 2010 and promulgated in the Turkish Trade Registry Gazette issue 7723 dated 05 January 2011, the company name was changed from Birlik Sigorta A.Ş. to Halk Sigorta A.Ş.

The Company’s approach to service and code of conduct were endorsed with the ISO-9000-2000 Quality Standard. The Company has been employing the Quality Management System since then.

2016

Drawing on the deep-rooted experience of 58 years, Halk Sigorta is currently engaged in Fire and Natural Disasters, Marine, Accident, Land Vehicles, Aircraft, Watercraft, General Losses, Land Vehicle Liability, Financial Losses, General Liability, Illness/Health, Surety, Rail Vehicles, Aircraft Liability, Watercraft Liability, Credit and Legal Protection branches offering service through an extensive delivery network comprised of 8 regional offices, 1,589 agencies broken down as 959 Halkbank branches and 630 private agencies, as well as the call center.


Overview of the World and Turkish Insurance Markets and Future Expectations

The stagnation in economies negatively affected the performance of the global insurance industry, as well. The growth rate of the worldwide insurance industry in 2016 is estimated at 2.6% with the added effect of economic contraction.

The World Economy and Overview of the World Insurance Market in 2016After experiencing stagnation in 2015, the European and world economies showed relative recovery in 2016. However, the occurrences around the globe revealed that growth would fail to capture the anticipated level. Referring to the same point in its report, the IMF revised its growth forecasts for the world economy. While the IMF had projected the 2016 growth rate at 3.6%, the same was decreased to 3.4% in view of the negative developments experienced. On the other hand, the general conviction is that the growth figure for year-end 2016 will lag behind the anticipations and growth will be balanced in the order of 3.1%. The surprise of the year for the Eurozone was the Brexit decision, i.e. the UK referendum, which resulted in favor of the country’s exiting EU membership. Leading to turmoil in the Eurozone, this development was among the factors that affected 2016 growth rate, in conjunction with economic hardships in some EU countries.

The yearlong anticipations that interest rates would be increased in the US, the turbulence and uncertainty caused by the presidential election in the world economy, the stagnation in Asian economies, the ongoing war climate in the Middle East, and declined commodity prices have slowed down the course of global growth.

Economic growth momentum lost pace in 2016 in developed countries where the expected increase in productivity remained elusive, inflation remained below the target, and the debt burden floated high. For these reasons, the IMF revised the 2016 growth rate estimate of developed countries as 1.6%.

Global trade volume continued to shrink, a tendency that has been going on since 2012. Political crisis between countries that act on economic activity and investments, and decelerated total demand in developed and emerging economies hamper the enlargement of trade volume in global economy, which is regarded as the key element triggering economic stagnation and shrinkage.

The stagnation in economies negatively affected the performance of the global insurance industry, as well. According to the report published by Swiss Re, the insurance industry expanded 3% worldwide in 2015, whereas the growth estimate for 2016 was 2.6% owing also to economic contraction. While the rise in non-life production in developed countries was 2.5% in 2015, the same slid down to 1.7% in 2016. As the increased production in Western European markets was linked to acceleration in auto insurance in Spain and Germany, the production levels captured last year were preserved in countries such as UK and France. In Italy, on the other hand, non-life production has a downtrend. The decline observed in premium production in this country persisted through 2016, although at a lesser extent than in previous years.


According to data from the Sigma report, the combined ratio in the US non-life market declined by 2.2 points in the first half of 2016 and went down to 99.8%. The primary reasons behind this fall included higher catastrophe losses and low reserves as compared with the previous year.

The Asia Region plays a significant role in the increased premiums written in the life branch by emerging countries, which expanded by approximately 20.1% according to year-end 2016 data. This ratio was 13.2% in 2015.

The greatest contributor to life branch premium production on a global scale, Asia registered 27% enlargement in production in 2016. The region’s production rise was 17% in 2015. Premium production on life branch in China increased by 34% in 2016, whereas it was 22% in 2015. Single-handedly responsible for nearly 57% of premium production in emerging countries in 2016, China showed that it has a remarkable potential. On the other hand, declined bancassurance sales slowed down premium production in Thailand, while there was deceleration in production in the Philippines owing to the insurers’ newly adopted focus on profitability.

According to the natural cat events report of Willis Re, natural cat losses suffered during 2016 are estimated to lead to the highest insured losses recorded since 2012. According to the report, natural cat losses worldwide dropped from USD 120 billion in losses in 2011 to USD 23 billion in 2015. Cat losses

that took place in 2016 are anticipated to amount to ca. USD 39 billion. Reportedly, the biggest-ticket loss following the USD 60 billion-cat loss of 2012 occurred in 2016. The natural disasters that caused the highest losses were, in order, Kumamoto earthquake in Japan that caused losses of USD 4.8 billion, forest fires in Canada causing USD 3.5 billion in losses, and Hurricane Matthew in the USA that caused USD 2.3 billion in losses.

In its published report, Swiss Re projected a measured growth in non-life premium production in 2017 and 2018. In the next two years, emerging countries will continue to be the drivers of the growth trend in non-life insurance. Premium production is forecasted to go up by 7-8% in these countries. Non-life production growth in developed countries, on the other hand, is expected to decline as compared with previous years, owing to higher inflation rates and slower economic growth rates. According to the Swiss Re report, growth is projected as 2.2% and 3% in 2017 and 2018, respectively in the global non-life market.


Overview of the World and Turkish Insurance Markets and Future Expectations

The Insurance Market in Turkey2016 has been quite an active year for the Turkish insurance market. The regulation of motor TPL (traffic) insurance premiums, online quotation screen implementation launched by the Insurance Information and Monitoring Center (in Turkish: SBM), and the regulations published made the highlights of the insurance market agenda in 2016.

Owing to the continued increase in premium production, coupled with reduced losses in motor TPL insurance, the industry finished 2016 with a positive momentum as compared with previous years. While the overall industry booked an accounting loss of TL 577 million in 2016, the accounting profit of TL 592 million captured at the end of the 3rd quarter of 2016 indicates at the significant improvement achieved.

With a 30% growth rate in total production, the industry had TL 35.4 billion in written premiums by the end of 2016. Motor TPL branch has once again claimed the highest share out of the overall production figure in the industry, as was the case in previous years. Motor TPL branch expanded by 72.6% annually on the basis of production worth TL 12.9 billion. Within all branches, motor TPL production has a market share of 36.6%. Upping its market share by a remarkable 33%, the motor TPL branch preserved its market dominance.

Motor own damage, fire, illness/health and general losses, on the other hand, stand out as other major branches taking significant share out of the total production in keeping with previous years’ trends. Declined premiums make up the primary cause that drove the year-on increase in motor TPL branch. Reduced premiums by insurers fuelled the interest in motor TPL insurance, resulting in 73% enlargement in production year-on.

The industry offset the technical loss posted in 2015 and booked profit according to data as at the end of the 3rd quarter of 2016. While technical loss amounted to TL 499 million at year-end 2015, the industry registered a technical profit of TL 948 million at the end of the 3rd quarter of 2016.

The industry witnessed two major episodes during 2016, the first one being the operations launched by the government to clear Southeast Anatolia of terrorist organizations following the intense terrorist activity in the region. Long-lived curfews imposed within the frame of these operations and the violent clashes led to terror damages in the region.

Mass damage inflicted by terrorist organizations on houses and vehicles caused losses worth approximately TL 5 billion in the region. The fact that increased demand for housing insurance before the inception of the operation in the region escaped the attention stemmed from the pro rata distribution of these demands among 30 insurers. After this fact surfaced, insurance companies looked deeper into the matter, revealing that housing insurance policies were issued at a high level one day before the launch of the operations and that certain

Total premium production by the overall industry increased 30%.

35.4 billionTL


agencies had led the issuance of these policies. The facts that individuals who had never before engaged in any insurance transaction bought housing policies and the insurance was actually provided by agencies active in other cities indicate at the extent of the pre-organization of these events.

Due to clashes in Nusaybin, Çukurca, Yüksekova, Şırnak and Sur, surveyors are unable to go to these areas, as a result of which clear information cannot be obtained about the magnitude of losses. Insurance companies chose to withhold the payments on loss policies from the region and to keep them on hold. The reason for keeping loss payments on hold is that surveyors are unable to access the region and therefore, to do loss ascertainment. Another reason is the fact that the government will reconstruct the area by way of expropriation and then hand them over to families who have suffered losses.

While dealing with the difficulties stemming from terrorist acts, the industry was next confronted with the coup d’état attempt of July 15th, an attack against the indivisible unity of our country and democratization. The atrocious coup attempt claimed the lives of hundreds of our fellow citizens, injuring many others, and damaging public buildings and vehicles. The loss from July 15 incident is estimated in the order of TL 10 million. After July 15th, insurance companies decided, at their own initiative, to compensate uncovered losses in addition to those covered by the policies as ex gratia payments. Hence, total claims paid topped TL 4 million.

In spite of all these adverse events, the industry remained adhered to its growth target and captured significant production rise also during 2016.

2016 has been the scene to regulatory changes with a potentially material impact on the Company’s activities. These changes are summarized below:

• Automatic enrollment in the PPS, the launch date of which was previously announced as 2016, was postponed, and it was announced that the system would go live at the start of 2017 following the arrangements made.

• The Insurance Information and Monitoring Center (SBM) created a policy quotation screen, which allows insured customers to see quotations by all insurers. The resulting competition gave rise to an anticipation toward declined motor TPL insurance premiums.

• Circular (2016/22) has been published, which concerns discounting the net cash flow from provisions for outstanding claims. Accordingly, insurance companies may discount the net cash flows arising from the provision for outstanding claims computed and set aside in accordance with the applicable insurance legislation, using the latest legal interest rate published in the Official Gazette as of the date of the financial reporting period.

The discounting occurs after all accrued, unreported amounts including adequacy differences are determined and following the gradual transition to be made according to Article 5/A of the Circular (2014/16) on Provision for Outstanding Claims, if applied.

Motor TPL branch has once again claimed the highest share out of the overall production figure in the industry, as was the case in previous years.


quality

servic

e


Our success is further strengthened by high customer satisfaction we ensure through our products designed according to customer needs, coupled with our solid technology.


Message from the Chairman

Distinguished Shareholders;

In 2016, the world economy kept attaining growth as it moved ahead. In its previous World Economic Outlook, the IMF had projected 2016 growth rate as 3.6% but was led to revise this figure to 3.4% during the year because of the developments in Europe and the Middle East. However, all world economies share the opinion that the year-end 2016 growth figure will be lower than in 2015, and growth is believed to materialize in the order of 3.1%. The tightened monetary policy by the US Federal Reserve (the Fed), the impact Brexit had on Europe, decelerated Chinese economy, the issues that remain unresolved in the Middle East and the negative effects resulting from declined commodity prices are regarded as the factors that caused the downward revision of growth targets of the global economy.

Since 2012, global trade volume has adopted a downturn, economic activity and investments have been declining, and total demand in developed and emerging economies have been losing pace. Political and economic ambiguity all over the world, increased indebtedness, the defects in the banking system, decreased productivity, contracted trade volume, economic embargoes countries impose against one another, and the failure to eliminate the problems in distribution of income keep the risk of long-lived stagnation in the world alive.

While growth rates of numerous developed and emerging countries fluctuated, Turkey has maintained a 27-quarter streak of economic growth. The repercussions of the increased terrorist attacks and the atrocious coup d’état attempt in July led to a temporary economic contraction in the third quarter. Our nation’s collective foresight, courage and valor prevented the political and economic coup that was attempted to be realized. Responding to abominable attacks with agility, our nation and government succeeded in quickly pulling through the economic weaknesses that stemmed from these negative circumstances.

Despite the political and economic coup that was attempted towards our country in 2016, many national projects such as employment campaign, tax regulations, debt restructurings, investment incentives aiming to revive, expand and accelerate economic activity have been put into force.


Despite the issues tainting the global economy and adverse occurrences within the country, demand in the domestic market remains lively. Demand contributed 5.7 points to the national economy in the first half of the year. The negative effect net exports suffered kept the GDP growth rate at 3.9% in the first half of 2016. While total demand contributed 5.6 points to growth in the first half of the year, 4.1 points thereof was derived from private consumption. Investments, on the other hand, shrank as of 2016 and reflected negatively by 0.1 point upon growth.

The exchange rates that plummeted particularly in the last quarter of the year clearly burdened the economy heavily. Through reverting the exchange rates that reached record-high levels back to their former values thanks to the adopted measures precluded economic contractions. It is predicted that the moves to rectify exchange rates will continue and the economy will move along in the targeted direction in the periods ahead.

Our country keeps putting her projects into life and taking significant steps in terms of economy in spite of all these negative occurrences in and out of the country. The insurance industry keeps expanding along the lines of all these developments, and continues to gain further strength by the day on the back of the reforms introduced in the industry. A significant contributor to the economy each year thanks to sustained growth, the insurance industry attained 30% enlargement in total production in 2016.

As Halk Sigorta family, it is among our priority goals to preserve the momentum of the growth trend we have captured in previous years so as to consolidate our position among the industry’s pioneers and to move ahead with resolve. The services we are delivering to our policyholders make up our primary responsibility drawing on the business philosophy of our extensive marketing network operating all over the country, which strictly adheres to reliability and integrity.

We are offering the unique opportunities of a high-quality and secure future to our customers on the back of the deep-seated, robust structure of Halkbank and our business conduct that instills team spirit in all employees. We will keep working to this end with devotion and resolution as we continue to build a secure future for our country and our valuable fellow citizens.

We express our deepest condolences for our heroic fellow citizens who have lost their lives during the hideous attack against our country on July 15th, wish comfort to their families, and full and speedy recovery to the injured. It is our sole wish that our country will never again be the target of such devious attacks, and the state and the country will live in unity and integrity.

We owe a debt of gratitude to all our policyholders, employees and stakeholders who walk with us along this path we are covering for pressing ahead to build a peaceful and secure future so that we can hold an optimistic outlook for the days to come.

Yours sincerely;

Ali Fuat TAŞKESENLİOĞLUChairman of the Board of Directors

Total production increase in the insurance industry

30%


Message from the General Manager

Distinguished Shareholders,

Amid an environment dominated by uncertainties in the world economy and political inconsistencies in 2015, our country single-handedly took on fulfilling the basic needs including accommodation, healthcare, food, and education of the majority of people who were forced to flee their homelands because of security issues caused by the ongoing clashes in the Middle East. Trying to take advantage of political uncertainties in our region, terrorist groups’ attacks to injure the national economy also constituted a significant cost factor. On the other hand, the US presidential election and the Fed’s practices related to interest rates during the reporting period brought along certain fluctuations for the world economy. The Brexit process in the UK jolted the European Union and unearthed the anticipations of a vague future for the Eurozone. Defying all these negative developments, the national economy did not lose its growth momentum owing to the strength and support lent by the political stability, and kept progressing in line with investment and economic targets.

The economic and political transformation that took place all over the world, naturally, bore its negative impact also on our country. After attaining 4% growth during 2015, the Turkish economy maintained this growth trend with respective figures of 4.8% and 3.1% in the first two quarters of 2016. In the third quarter of the year, however, the national economy shrank by 1.8%.

The key reason behind the contracted economy is the bloody coup and occupation attempt of July 15th. The hideous coup was an act against the Turkish state and intended to occupy our beloved homeland. The gallantry our nation displayed at the expense of shedding their own blood and losing their lives against those who were involved in this horrendous uprising, and their resistance with the vision of resurrection based on an awareness of historic values have taught an unforgettable lesson to those cliques striving to get in the way of the new Turkey. Our nation, once again, declared upon the whole world that no human power would ever be able to conquer the precious Turkish nation.

In defiance of political and economic attacks against our country in 2016, employment mobilization, tax regulations, debt restructuring initiatives, investment incentives and many other national projects were intended to fuel economic life to help the economy expand and gain momentum. The measures taken recently first of all curbed the rise in exchange rates and stirred commercial life. The low-interest, long-term option offered particularly in housing finance

In spite of all the negative developments in 2016, the national economy did not lose its growth momentum owing to the strength and support derived from the political stability, and kept improving in line with investment and economic targets.

Halk Sigorta’s profit

22 millionTL


has been instrumental in quickly eliminating the stagnation and contraction of the economy, and in regained speed by investments.

In this process, non-life insurance industry undersigned an important achievement and secured 30% expansion year-on in total premium production in 2016 and reached TL 35.4 billion.

Land Vehicle Liability branch took the highest share out of total premium production with a growth rate of 73% and TL 12.9 billion. The production in the Land Vehicles branch amounted to TL 6.2 billion, up 11%, and in the Fire and Natural Disasters branch to TL 4.8 billion, up 10%. While these three branches accounted for 64% of total premium production in 2015, this value went up to 68% at end-2016.

The rise in premiums of motor TPL policies has dogged the public agenda for a long time. The effect of the technical loss booked by this branch in 2015, combined with the higher exchange rates and higher claims costs stemming from regulatory arrangements inevitably reflected on policy premiums. The total number of policies increased by a mere 2% in view of 80% rise in total premium production, which drove average policy premium by nearly 78%. In this period, our Company spent special effort that tradesmen, who have a share in our organization, were not exposed to increased costs. By keeping our prices at the lowest possible level in vehicles particularly used by our tradesmen such as taxicabs, minibuses and trucks, we kept the prices at a certain level in the market. While our market share in motor TPL branch was 4.7% in 2016, we reached 26% share in taxicabs, 23% in buses, 13% in minibuses and 8% in trucks.

Despite so many negative events with respect to the insurance industry, the industry achieved increased production and secured profitability in 2016, thanks to the environment of trust enabled by a consistent administration. At Halk Sigorta, we also sustained our profitability and booked an accounting profit of TL 22.0 million as at year-end 2016.

2016 has been a year that we, as Halk Sigorta family, completed successfully. We keep working with resolve and devotion in a bid to arrive at our targets. Ending 2016 with TL 1,035 million in total production, our Company captured a growth rate that outdid the industry with a production growth of 36.7% as compared with 2015.

Out of TL 1,035 million we have booked in production, TL 598 million was derived on motor TPL branch, TL 139 million on motor own damage, and TL 183 million on fire branch.

Our market share went up from 2.78% at year-end 2015 to 2.92% at year-end 2016. The production realized by these three branches represents 89% of our total production.

Strongly backed by our Bank, our regional sales teams work at full strength to achieve their assigned targets, undertaking marketing activities in every region where our Bank has a presence.

These achievements that we have secured as Halk Sigorta community in the reporting period are the result of the committed and hard work of all our employees. We will carry on with our efforts to make sure that all our policyholders, shareholders and employees feel safe and at ease also in the future, while moving ahead remaining adhered to our growth and profitability targets.

I present my deepest condolences for our fellow citizens who have been martyred during the villainous coup and occupation attempt of July 15th, wish comfort to their families, and full and speedy recovery to the injured. I wish that these incidents will not be repeated ever again for the sake of unity and integrity of our country.

We keep working with commitment to be worthy of all our policyholders, employees and stakeholders by realizing each and every one of our targets along the way focused on success. I would like to thank them all from the bottom of my heart.

Bülent KARANBoard Member and General Manager

Outgrowing the industry with 36.7% rise in premium production

1,035millionTL


The Company’s Organization, Capital and Shareholding Structure

Organization Structure

Deputy General ManagerMarketing

Bankassurance Department Fire and Engineering Department

HR and Support ServicesDepartment Accounting Department

Agencies Department Auto Accident Insurance Department

Auto Accident Claims Department Collections Department

Publicity and Public Relations Department Health Insurance Department Non- Auto Claims Department IT

Department

Regional Representative Offices Marine and Liability Insurance Department

Customer Satisfaction and Claims Notification and Settlement

Department

Reinsurance Department Claims Monitoring and Logistics Department

ActuaryDepartment

Risk Liquidation and Recourse Department

Deputy General Manager Claims and HR

Deputy General Manager Financial Management

Deputy General Manager Technical Affairs

Board of Directors

Legal Affairs Department Consultant

Office ManagementInternal Control and Risk

Management Department

General Manager

Internal Audit Department


Capital and Shareholding Structure

Date of Incorporation 27 December 1958

Registered Capital TL 150,000,000

Paid-in Capital TL 129,000,000

The Company’s capital is TL 129,000,000.-, which is divided into 12,900,000,000.- shares each with a value of TL 0.01.

Pursuant to the Board of Directors resolution dated 17 May 2016 and no. 862, it was decided to raise the capital by TL 35,000,000 through a bonus issue, and that TL 7,500,000 out of the incremental amount be covered from 2015 profit share and TL 27,500,000 from extraordinary reserves. The Company’s application for increasing the capital filed with the CMB was approved on 30 June 2016. The capital increase was registered on 15 July 2016 and promulgated in the Trade Registry Gazette issue 9120 dated 21 July 2016.

Pursuant to the Board of Directors resolution dated 27 December 2016 and no. 920, it was decided to set the new authorized capital as TL 500,000,000 from 2017 through 2021. The rise in the authorized capital was approved by the CMB on 4 January 2017 and by the T.R. Ministry of Customs and Trade Directorate General of Domestic Trade on 3 February 2017, and the same will be registered and promulgated upon its ratification at the first General Assembly meeting to be convened.

The Chairman or the members of the Board of Directors, the General Manager and Assistant General Managers do not hold shares in the Company’s capital.

Shareholders Capital (TL)Türkiye Halk Bankası A.Ş. 115,042,498

Others 13,957,502

Total 129,000,000

Türkiye Halk Bankası A.Ş.

Others

TL 115,042,498

TL 13,957,502


Ali Fuat TAŞKESENLİOĞLUChairman of the Board of DirectorsBorn in 1964 in Erzurum, Ali Fuat Taşkesenlioğlu received his bachelor’s degree in business administration from the Faculty of Economics and Administrative Sciences at Atatürk University and his master’s degree in finance from the Institute of Social Sciences at Beykent University, where he currently pursues his doctorate studies in Business Administration Department. He began his career in 1988 in Yenidoğan Yayın Dağıtım Şirketi. He worked at Faisal Finans Kurumu A.Ş. as Chief Specialist (1988-1996), and joined Asya Katılım Bankası A.Ş. in October 1996, where he served in the positions of Project Marketing Assistant Manager, branch manager of Merter and Sultanhamam branches, Credit Allocation Unit Manager and Assistant General Manager for Credit Allocation, respectively. Elected as a member of the Board of Directors of Vakıfbank on 30 March 2012, he served as an alternate member of Audit and Credit Committee at Vakıfbank. From 20 April 2012 to 07 February 2014, he was the Chairman of the Board of Vakıf Portföy Yönetimi A.Ş, Deputy Chairman of the Board of Directors of Vakıf Finans Factoring Hizmetleri A.Ş. and Deputy Chairman of the Board of Directors of Vakıf Menkul Kıymetler Yatırım Ortaklığı A.Ş. Ali Fuat Taşkesenlioğlu has been serving as the Board member and General Manager of Halkbank since 07 February 2014.

Sadık TILTAKDeputy Chairman of the Board of Directors

Sadık Tıltak received his degree in public finance from the Faculty of Political Science at Ankara University. He started his professional life as an assistant inspector at Garanti Bank in 1988, where he later worked as a branch manager and manager at Head Office Units. Elected as a Board of Directors member of Vakıfbank on 30 March 2012, he was a member of the Credit Committee, Corporate Governance and Nominating Committee and Audit Committee at Vakıfbank. In tandem, he also held the positions of the Chairman of the Board of Directors of Vakıf Finans Factoring Hizmetleri A.Ş., and deputy chairman of the boards of directors of Vakıf Gayrimenkul Değerleme A.Ş., Vakıf Pazarlama ve Ticaret A.Ş. and Vakıf Portföy Yönetimi A.Ş. Sadık Tıltak has been serving as an independent member of the Board of Directors at Halkbank since 01 April 2014.

Yusuf Duran OCAKMember of the Board of Directors

Born in Kadirli, Adana in 1966, Yusuf Duran Ocak received his degree in public finance from the Economic and Administrative Sciences at Gazi University. He started his career at Halkbank as an assistant inspector in 1991, where he assumed the position of inspector in 1994, Vice Chairman of the Board of Inspectors in 2000, Head of General Accounting Department in 2001, and Head of Balance Sheet Consolidation and External Reporting Department in 2002. He has been serving as the Head of Financial Accounting and Reporting Department at Halkbank since July 2007.

Rifat Ertuğ KOÇMember of the Board of Directors

Born in 1976 in Oltu, Erzurum, Rifat Ertuğ Koç received his degree in economics from Süleyman Demirel University, Faculty of Economics and Administrative Sciences. He started his career in 1999 as an officer at Halkbank, where he served first as assistant inspector and then as an inspector on the Board of Inspectors between 2002 and 2008. He was appointed as branch manager of İzmir Sanayi Sitesi Branch in 2008. He has been serving as Antalya Regional Coordinator since 25 August 2014.

Hüseyin ZEYBEKMember of the Board of Directors

Born in 1970 in Ankara, Hüseyin Zeybek received his degree in labor economics and industrial relations from Ankara University, Faculty of Political Science. He started his career in 1995 on the Board of Inspectors of Halkbank, where he held the positions of inspector, chief inspector and branch manager. He currently serves as the Head of Organization Department.

Board of Directors


Süheyla Gülgün KOYUNCUOĞLUMember of the Board of Directors

Born in Ankara, Süheyla Gülgün Koyuncuoğlu received her degree in public administration from Anadolu University, Faculty of Economics and Administrative Sciences. She holds an MBA and currently pursues her doctorate studies in business administration. She served as an assistant manager at the Chief of Cabinet in the Grand National Assembly of Turkey. She held the positions of Political Advisor to the Member of the Presidency Council of the Parliament, Advisor to the Minister in the Ministry of Treasury, Ministry of Foreign Affairs, and Ministry of Finance, member of the Board of Directors of AYEDAŞ, member of the Board of Auditors at Sümer Holding, and member of the Board of Auditors at Cyprus Turkish Shipping Company. She currently serves as an Advisor to the Deputy Prime Minister.

Elif ÖPÇİNMember of the Board of Directors

Born in 1972 in Silivri, İstanbu, Elif Öpçin received her degree in economics from Anadolu University, Faculty of Economics in 1999. She completed a graduate program in Management Economics at İstanbul Kültür University, Institute of Social Sciences, Economics Department. She started her career in 1992 as an officer at Pamukbank. Following the hand-over of Pamukbank, she worked in various positions at Halkbank. She was appointed as branch manager of Güngören Branch in 2005. She then served, in order, as branch manager of Sefaköy Branch and Merter Branch. She has been serving as branch manager of Gayrettepe Branch since 25 August 2014.

Abdullah Kubilay ÖZDÖLMember of the Board of Directors

Born in 1972 in Ankara, Abdullah Kubilay Özdöl received his undergraduate degree in public finance from Ankara University, Faculty of Political Sciences. He started his professional life in 1997 as an assistant specialist at Halkbank, where he later held the positions of specialist, supervisor and branch executive. He worked at Halkbank Head Office, Capital Markets, Treasury Operations units and in various branches. Fluent in English, he currently serves as Kızılay / Ankara Commercial Branch Executive. He is married and has one daughter.

Bülent KARANMember of the Board of Directors and General Manager

After receiving his degree in petroleum engineering from İstanbul Technical University, Faculty of Mines, Bülent Karan got his MBA from Sakarya University Institute of Social Sciences. He started his career in 1991 at Aladdin Middle East Ltd. Şti. Later, he held managerial positions in media, advertising, construction and food industries. He joined Halk Sigorta as Marketing Group Manager in April 2006, where he served as Assistant General Manager of Marketing from September 2007, Assistant General Manager of Operation from February 2012 until March 2015, and Assistant General Manager of Marketing from March 2015. He has been appointed as acting General Manager on 11 July 2016, to which position he has been appointed in full capacity effective 01 December 2016.

Board of DirectorsName-Surname TitleAli Fuat TAŞKESENLİOĞLU Chairman

Sadık TILTAK Deputy Chairman

Yusuf Duran OCAK Member

Rifat Ertuğ KOÇ Member

Hüseyin ZEYBEK Member

Süheyla Gülgün KOYUNCUOĞLU Member

Elif ÖPÇİN Member

Abdullah Kubilay ÖZDÖL Member

Bülent KARAN General Manager (Since 1 December 2016)


Bülent KARANGeneral ManagerBülent Karan received his degree in petroleum engineering from the Faculty of Mines at İstanbul Technical University in 1991 and then his MBA from the Institute of Social Sciences at Sakarya University. He started his career in 1991 at Aladdin Middle East Ltd. Şti. He then held managerial positions in media, advertising, construction and food industries. He joined Halk Sigorta in April 2006 as Marketing Group Manager. After holding the position of Deputy General Manager of Marketing at Halk Sigorta A.Ş. from September 2007, and Deputy General Manager of Operations from February 2012 until March 2015. From March 2015, he served as Assistant General Manager of Marketing. He has been appointed as acting General Manager on 11 July 2016, to which position he has been appointed in full capacity effective 01 December 2016.

Senior Managers

Senior ManagersBülent KARAN

General Manager(since 1 December 2016)

Suat İNAN Deputy General Manager- Financial Management

Ömer SACAN Deputy General Manager- Technical Affairs

Ömer SACAN Deputy General ManagerBorn in 1965, Ömer Sacan graduated from İskenderun High School and received a bachelor’s degree in mathematics from the Faculty of Science at Dicle University and in business administration from the Faculty of Business Administration at Anadolu University. He got his master’s degree in insurance from the Institute of Banking and Insurance at Marmara University. After working as a math teacher (in English) at MEB Sultanahmet Anadolu Technical High School in 1990, he won the competition exam for becoming an Insurance Supervision Assistant Actuary held by the Insurance Supervision Board, upon which he started working as an Insurance Supervision Assistant Actuary at the Insurance Supervision Board in 1991. He successfully passed the subsequent qualification exam, and was appointed as an Insurance Supervision Actuary based on a joint decree in 1995. After a one-year research in insurance in London, U.K., Ömer Sacan served as Deputy President of the Insurance Supervision Board under the Undersecretariat of Treasury, and held a member’s seat on the Board of Directors of Rumeli Hayat Sigorta A.Ş. representing the Undersecretariat of Treasury. Having also functioned as an arbitrator on the Insurance Arbitration Commission, Ömer Sacan has been appointed as Deputy General Manager of Technical Affairs on 01 September 2015 while he was serving as Economic Attaché representing the Undersecretariat of Treasury with the Consulate General of the Republic of Turkey in Jeddah, to which position he had been appointed based on a joint decree on 01 September 2013.

Suat İNANDeputy General ManagerBorn in 1961 in Kastamonu, Suat İnan got his bachelor’s degree from the Faculty of Business Administration at Anadolu University. He began his career in 1983 as Assistant Supervisor of Loans at Pamukbank. He worked in the Loans unit at Dışbank for 4 years. He was appointed as Assistant Manager of Accounting at Pamukbank in 1994, where he was promoted as the Accounting Section Head in 1996. Brought to the position of the Section Head of Accounting Department at Halkbank Head Office in 2004, Suat İnan was assigned as Section Manager at the Tax Management and Accounting Department at Halkbank Head Office in 2007. He has been serving as the Deputy General Manager of Financial Management since June 2013.


Information on Management and Personnel

Number of personnel employed by categories during the reporting period

31 December 2016Executive management (*) 4

Other employees 240

Total 244

(*) Including the Company’s general manager, assistant general managers and consultant.

Number of personnel employed at the head office and regional officesHead Office 175

Ankara Regional Sales Directorate 14

İstanbul Regional Sales Directorate 9

Aegean Regional Sales Directorate 10

Anatolia Regional Sales Directorate 10

Adana Regional Sales Directorate 7

Bursa Regional Sales Directorate 8

Antalya Regional Sales Directorate 6

Trabzon Regional Sales Directorate 5

Total 244


proactive approach


proactive approach

Our active risk management approach enables us to increase our productivity, while reducing sales costs and operational expenses.


Service Process Development Activities of the Company • All process analyses in relation to digitized file review

have been conducted and are being actively used. The project for migrating all file review processes to the digital environment has been brought to completion, and has been vested in a user-friendly format through additional developments.

• Analysis and work flows have been created in relation to the need for enabling service units to enter the claims files notifications into the system via the website.

• Developments involving access capability to individuals and organizations from which services are purchased have been carried out depending on the service type purchased in file processes within the scope of claims files. Real life tests are in progress.

• Recognition of invoices as expense has been completed and made available for use by business units.

• Work has been completed for delivering motor TPL insurance quotations from the Insurance Information and Monitoring Center websites.

• Within the frame of bancassurance activities:

• Processes and analyses are ongoing for executing policy sales via Halkbank internet branch.

• Segmentation of Halkbank customer portfolio has been completed. Real life testing is ongoing.

• User-friendly developments for policy production, and developments for providing information to customers have been carried out.

• Analyses have been completed and software work is in progress for motor own damage and motor TPL quotations and policy production by entering T.R. Identification and Tax Identification numbers.

• Analysis and software have been completed for allowing execution of collection processes based on automatic instructions for policies produced within the scope of bancassurance. Real life testing is being conducted using the pilot branch. This development made the collection of a downpayment in policy premiums compulsory. Remaining premiums can be collected in installments, by taking an automatic payment order.

• Analysis and software processes have been completed for performing the collection and agencies’ reconciliation processes over the system. Real life testing is ongoing.

• This development enables the Company and the agency to do reconciliation via the system for policies the premiums of which have been collected. Within the frame of this application, reminders for initiating the work, non-reconciliation or reconciliation messages (SMS, e-mail) will be automated.

Research and Development Activities of the Company


Distinguished Shareholders,

After posting a profit of TL 8.3 million in 2015 by capitalizing on the positive momentum the national economy captured as opposed to the stagnated world economies, our Company sustained its profitability and booked a profit of TL 22.0 million as at year-end 2016. The national insurance industry generated a premium production figure of TL 35 billion on non-life branches in 2016, representing a changeover by 29.85% as compared with 2015 on the basis of total premium production. During the same period of time, our Company increased its premium production from TL 757 million to TL 1,035 million, up by 36.72%. Our market share, on the other hand, went up from 2.78%. to 2.92% despite our significantly expanded premium production.

Our key target for 2017 and thereafter is to achieve sustainable profitability, as well as shareholder and employee happiness, to make a breakthrough in bancassurance with the support of our controlling shareholder Halkbank, and to make optimum use of the Bank’s potential to climb to high rankings in premium production generated by the bank.

Our primary targets will also include to grow the insurance pie in Turkey and to lead making better use of the potential with the impact and support of the positive trend in national economy.

We hereby respectfully present the Company’s operating results in 2016 fiscal year for your review and approval.

I. IncomeA. Technical IncomeThe Company’s premium production on non-life branches amounted to TL 1,035,484 thousand in 2016. The highest contributors to increased premiums were land vehicles liability, land vehicles, accident and general losses branches.

B. Financial IncomeThe Company’s investment income was worth TL 84,438 thousand at year-end 2016. TL 78,000 thousand of this amount was generated on income from financial assets, TL 6,364 thousand on currency translation gains, TL 40 thousand on revenues from land, building lots and buildings, and TL 33 thousand from derivative products.

Summary Board of Directors Report


II. ExpensesA. Technical ExpensesOut of TL 1,035,484 thousand written in 2016, TL 168,839 thousand and TL 58,649 thousand have been ceded to reinsurance companies and Social Security Institution, respectively.

Gross claims paid were up by 41.91 % year-to-year and rose from TL 296,998 thousand to TL 421,475 thousand.

B. Financial CostsFinancial costs for 2016 amounted to 39,506 thousand. Of this amount, TL 31,013 thousand consisted of investment income transferred to technical accounts, TL 3,131 thousand of currency translation losses, TL 3,127 thousand of depreciation, a TL 153 thousand of investment management costs, TL 1,928 thousand of income/profits and costs/losses on other operations and extraordinary operations and TL 154 thousand of sales of investments.

C. Overhead ExpensesDuring 2016, administrative expenses totaled TL 6,698 thousand, marketing and sales expenses TL 624 thousand, personnel expenses TL 25,909 and outsourcing costs TL 19,200 thousand.

III. ConclusionThe Company booked a technical income of TL 766,521 thousand and technical expenses of TL 778,928 thousand on non-life branches in 2016. Investment income and investment expenses amounted to TL 84,438 thousand and TL 37,578 thousand respectively, while income/profits and costs/losses on other operations and extraordinary operations totaled TL 1,928 thousand. At the bottom line, the Company posted a gross profit for the period in the amount of TL 32,525 thousand and a net profit after tax for the period of TL 22,002 thousand.

Summary Board of Directors Report

Sadık TILTAKDeputy Chairman of the Board of Directors

Hüseyin ZEYBEKMember of the Board of Directors

Abdullah Kubilay ÖZDÖLMember of the Board of Directors

Bülent KARANMember of the Board of Directors

Yusuf Duran OCAKMember of the Board of Directors

Süheyla Gülgün KOYUNCUOĞLUMember of the Board of Directors

Ali Fuat TAŞKESENLİOĞLUChairman of the Board of Directors

Rifat Ertuğ KOÇMember of the Board of Directors

Elif ÖPÇİNMember of the Board of Directors


Financial Highlights (TL million) 2016 2015(*)

Total Premium Production 1,035 757

Total Assets 1,180 827

Claims Paid 421 297

Paid-in Capital 129 94

Shareholders’ Equity 207 185

Pretax Profit 33 25

Net Profit 22 25

Capital Adequacy Ratios 2016 2015(*)

Premiums Received/Shareholders’ Equity 5.00 4.09

Shareholders’ Equity/Total Assets 0.18 0.22

Shareholders’ Equity/Technical Provisions 0.25 0.35

Asset Quality and Liquidity Ratios 2016 2015(*)

Liquid Assets/Total Assets 0.79 0.76

Liquidity Ratio 0.98 1.01

Current Ratio 1.22 1.33

Premium and Reinsurance Receivables/Total Assets 0.13 0.14

Receivables from Agencies/Shareholders’ Equity 0.22 0.28

Operational Ratios 2016 2015(*)

Retention Ratio 0.78 0.74

Claims Payment Ratio 0.43 0.51

Profitability Ratios 2016 2015(*)

Loss-Premium Ratio (gross) 0.74 0.64

Combined Ratio (Loss-Premium Ratio (net) + Cost Ratio) 1.08 1.05

Loss-Premium Ratio (net) 0.82 0.75

Cost Ratio 0.26 0.29

Pretax Profit/Written Premiums 0.03 0.03

Technical Profit (Technical Division Balance)/Written Premiums -1.20 1.15

(*) 2015 figures have been adjusted as per the circular no: 2016/22 of the Undersecretariat of Treasury.

Key Financial Indicators


balancedportfolio


We create an evenly-distributed portfolio on the basis of sectors, customers and geography thanks to the broad customer base we reach through agency, broker and bank channels, while we maintain our healthy asset structure.


20162015

37.52%

598,239

435,024

20162015

36.71%

1,035,484

757,404

Premium Production by Branches

Land Vehicles (TL thousand)

Aircraft (TL thousand)

Land Vehicle Liability (TL thousand)

Marine(TL thousand)

Fire and Natural Disasters (TL thousand)

Watercraft(TL thousand)

Total Premium Production(TL thousand)

20162015

14.28%

182,732 159,894

20162015

99.39%

138,732

69,578

20162015

-36.22%

1,257

1,972

20162015

-54.57%

233

513

20162015

-89.63%39

375


Accident(TL thousand)

Surety(TL thousand)

Aircraft Liability(TL thousand)

General Liability (TL thousand)

Illness/Health (TL thousand)

General Losses (TL thousand)

Financial Losses(TL thousand)

20162015

51.73%

29,228

19,263

20162015

5.95%

8,743 8,253

20162015

26.54%

42,750

33,785

20162015

24.41%

218

175

20162015

19.99%

27,701

23,086

20162015

1.62%

5,575 5,486

20162015

35


Premium Production by Branches by the Turkish Insurance Industry in 2015 & 2016

Branches31.12.2016

Premium Production (TL) Share (%)31.12.2015

Premium Production (TL) Share (%)Accident 1,431,582,588 4.04 1,196,577,633 4.39

Illness/Health 4,226,078,010 11.92 3,436,530,446 12.60

Land Vehicles 6,170,691,462 17.41 5,551,397,549 20.36

Rail Vehicles 11,068 0.00 16,835 0.00

Aircraft 105,544,386 0.30 75,365,723 0.28

Watercraft 177,523,623 0.50 176,889,820 0.65

Marine 549,455,622 1.55 534,078,929 1.96

Fire and Natural Disasters 4,827,636,262 13.62 4,391,225,608 16.11

General Losses 3,498,930,670 9.87 2,978,132,377 10.92

Land Vehicle Liability 12,931,210,415 36.48 7,486,398,536 27.46

Aircraft Liability 128,611,351 0.36 123,098,712 0.45

Watercraft Liability 22,117,064 0.06 16,758,157 0.06

General Liability 816,065,370 2.30 758,010,417 2.78

Credit 171,623,322 0.48 185,239,267 0.68

Surety 30,392,023 0.09 29,154,217 0.11

Financial Losses 234,860,838 0.66 226,583,127 0.83

Legal Protection 123,119,421 0.35 95,863,842 0.35

Support 2,535,191 0.01 3,165,708 0.01

Total Non-Life 35,447,988,684 87.6 27,264,486,899 87.9Total Life 5,038,808,257 12.4 3,761,410,730 12.1Grand Total 40,486,796,941 100.0 31,025,897,629 100.0

Premium Production by the Turkish Insurance Industry


Changes in Premium Production by the Overall Sector and by Halk Sigorta in 2015 & 2016Sector’s Premium Production Halk Sigorta’s Premium Production

Branches Change (Nominal) (%) Change (Real) (%) Change (Nominal) (%) Change (Real) (%)Accident 19.64 10.24 51.73 39.81Illness/Health 22.98 13.31 19.99 10.56Land Vehicles 11.16 2.42 99.39 83.72Rail Vehicles -34.26 -39.42 - -Aircraft 40.04 29.04 -89.63 -90.45Watercraft 0.36 -7.53 -54.57 -58.14Marine 2.88 -5.21 -36.22 -41.24Fire and Natural Disasters 9.94 1.30 14.28 5.30General Losses 17.49 8.25 26.54 16.59Land Vehicle Liability 72.73 59.15 37.53 26.72Aircraft Liability 4.48 -3.73 622383.72 573459.12Watercraft Liability 31.98 21.60 - -General Liability 7.66 -0.80 5.95 -2.38Credit -7.35 -14.63 - -Surety 4.25 -3.95 24.41 14.64Financial Losses 3.65 -4.49 1.62 -6.36Legal Protection 28.43 18.34 -100.00 -100.00Support -19.92 -26.21 - -Total Non-Life 30.02 19.80 36.72 25.97Total Life 33.96 23.43 - -Grand Total 30.49 20.24 36.72 25.97

Premium Production by Branches by Halk Sigorta in 2015 & 2016

Branches31.12.2016 Premium

Production (TL) Share (%)31.12.2015 Premium

Production (TL) Share (%)Accident 29,228,387 2.82 19,263,171 2.54Illness/Health 27,701,447 2.68 23,086,466 3.05Land Vehicles 138,731,538 13.40 69,577,528 9.19Aircraft 38,907 0.00 375,348 0.05Watercraft 232,859 0.02 512,544 0.07Marine 1,257,472 0.12 1,971,650 0.26Fire and Natural Disasters 182,732,162 17.65 159,893,889 21.11General Losses 42,750,030 4.13 33,784,567 4.46Land Vehicle Liability 598,239,048 57.77 435,024,011 57.44Aircraft Liability 35,170 0.00 6 0.00General Liability 8,743,406 0.84 8,252,614 1.09Surety 218,293 0.02 175,457 0.02Legal Protection 0 0.00 31 0.00Financial Losses 5,575,441 0.54 5,486,392 0.72Total 1,035,484,162 100.00 757,403,673 100.00

In 2016, Halk Sigorta registered a premium production of TL 1,035 million, up 36.71% in real terms. The Company’s share in the non-life market, which was 2.78% in 2014, stood at 2.92% in 2016.


An Assessment of Technical Accounts in 2016

Premium Production (TL thousand)

Combined Ratio (Net) (%)

Claims Paid (TL thousand)

Technical Profitability Ratio(%)

Loss Premium Ratio (Net) (%)

Total premium production grew by TL 278,080 thousand in the twelve months to end-2016 and reached TL 1,035,484 thousand.

2016 2016 20162015 2015 2015

36.71% 41.91% 6.28 pps

1,035,484 421,475 81.68

757,404 296,998

75.40

20162016

2015 2015

3.76 pps -2.35 pps

107.81

-1.20

104.05 1.15


Land Vehicle Liability

Premium Production(TL thousand)

Combined Ratio (Net)(%)


Technical Profitability Ratio (%)


In the Land Vehicles Liability branch, premium production went up by TL 163,215 thousand over the course of one year to TL 598,239 thousand at end-2016.

2016 2016 20162015 2015 2015

37.52% 51.37% -2.96 pps

598,239 263,583 86.94

435,024174,127

89.91

20162016

20152015

-6.18 pps 1.40 pps

109.48

-3.62

115.67

-5.03


Fire and Natural Disasters






In the Fire and Natural Disasters branch, 2016 premium production reached TL 182,732 thousand, higher than its 2015 value by TL 22,838 thousand.

2016 2016 20162015 2015 2015

14.28% 1.31% 21.41 pps

182,732 34,945 45.79 159,894

34,494

24.38

2016 20162015 2015

24.74 pps -7.84 pps

73.37

9.24 48.63

17.08


Land Vehicles






In the Land Vehicles branch, 2015 premium production increased by TL 69,154 thousand to TL 138,732 thousand

2016 2016 20162015 2015 2015

99.39% 40.74% 17.30 pps

138,732 85,136 107.81

69,578

60,491 90.51

20162016

20152015

16.95 pps 0.93 pps

137.34

-18.10

120.39

-19.04


Marine






In the Marine branch, 2016 premium production slimmed down by TL 715 thousand to TL 1,257 thousand.

2016 2016 20162015 2015 2015

-36.22% -86.51% 24.74 pps

1,257

190

47.24 1,972 1,409

22.50

2016 20162015 2015

31.61 pps 8.09 pps

76.57 25.09

44.96 17.00


Watercraft






In the Watercraft branch, 2016 premium production decreased by TL 280 thousand to TL 233 thousand.

2016 2016 20162015 2015 2015

-54.57% 17.15% -42.00 pps

233

43

1.23

513 37

43.23

20162016

20152015

0.96 pps 3.78 pps

65.65 11.26 64.69

7.48


Aircraft




In the Aircraft branch, 2016 premium production shrank by TL 336 thousand to TL 39 thousand.

2016 20162015 2015

-89.63%39

446 375

20162015

62.01 pps

69.17

7.16


Accident






In the Accident branch, 2016 premium production augmented by TL 9,965 thousand to TL 29,228 thousand.

2016 2016 20162015 2015 2015

51.73% 24.64% 1.29 pps

29,228 2,322 17.56

19,263 1,863

16.26

20162016

20152015

10.30 pps -10.25 pps

75.46

23.81

65.16 34.06


General Liability






In the General Liability branch, premium production expanded by TL 490 thousand year-on to reach TL 8,743 thousand in 2016.

20162015

5.95%

8,743 8,253

20162015

87.78%

2,173

1,157

2016

2016

2015 2015

180.83 pps -26.32 pps

230.42

-17.29

49.59

9.03

20162015

156.61 pps

224.71

68.10


General Losses






In the General Losses branch, premium production was up by TL 8,965 thousand to TL 42,750 thousand in 2016.

2016 2016 20162015 20152015

26.54% 30.24% 25.53 pps

42,750 21,081 25.51

-0.02

33,785 16,186

2016 20162015 2015

24.74 pps -3.36 pps

48.98

14.25

24.24

17.61


20162015

-1.24 pps

35.43 36.67

Surety






In the Surety branch, premium production increased by TL 43 thousand to TL 218 thousand in 2016.

20162015

24.41%

218

175

20162015

-94.91%1

14

20162015 -13.65 pps

-17.95

-4.30

20162015

-12.13 pps0.79

12.92


Illness/Health






In the Illness/Health branch, premium production grew by TL 4,615 thousand year-on and reached TL 27,701 thousand in 2016.

20162015

19.99%

27,701

23,086

20162015

45.55%

7,210

4,953

20162015

-0.26 pps

23.47 23.73

2016 20162015 2015

-13.70 pps 9.49 pps

88.67 11.87 102.37

2.38


20162015

-0.96 pps

40.26 41.22

20162015

2.61 pps

61.6459.03

Financial Losses






In the Financial Losses branch, premium production increased by TL 89 thousand annually and reached TL 5,575 thousand in 2016.

20162015

1.62%

5,575 5,486

20162015

91.68%

4,344

2,266

20162015

-1.49 pps

8.75 10.24


Aircraft Liability



In the Aircraft branch, premium production in 2016 was TL 35 thousand.

20162015

35

2016

2015 1,575.85 pps 3.51

-1572.34


An Assessment of Non-technical Accounts in 2016

Investment Income (TL thousand) 2016 2015(*) Change %Income from Financial Investments 68,646 41,775 64Revenues from the Sales of Financial Investments 7,196 4,090 76Valuation of Financial Investments 2,158 2,994 (28)FX Gains 6,364 8,525 (25)Dividend from Affiliates 0 272 (100)Income from Derivatives 33 251 (87)Income from Real Estate 40 178 (77)Total 84,438 58,085 45

Investment Expenses (TL thousand) 2016 2015(*) Change %Investment Revenues Transferred to the Technical Division (-) (31,013) (22,100) 40FX Losses (-) (3,131) (5,889) (47)Investment Management Expenses Including Interests (153) (143) 8Devaluation of Investments - - 0Losses from the Sales of Investments (154) (143) 8Losses from Derivatives (-) 0 0 0Depreciation Expenses (-) (3,127) (2,911) 8Total (37,578) (31,187) 20

Revenues, Income, Expenses and Losses from Other Operations (TL thousand) 2016 2015(*) Change %Provisions (+/-) (5,273) (4,837) 9Rediscounts (+/-) 64 (477) 113Deferred Tax Liability Revenues 4,073 0 100Deferred Tax Liability Expenses (-) 0 (2,052) (100)Other Revenues and Profits 344 384 (10)Other Expenses and Losses (-) (1,136) (157) 64Total (1,928) (7,139) (73)

Equity Breakdown (TL thousand) 2016 2015(*) Change %Paid-in Capital 129,000 94,000 37Nominal Capital 129,000 94,000 37Capital Reserves 95 95 0Profit Reserves 17,287 44,154 (61)Prior Years' Losses 0 0 0Net Profit 22,002 24,607 (11)Total Shareholders' Equity 207,177 185,375 12

Investments (TL thousand) 2016 2015(*) Change %Financial Assets and Risk Insureds’ Financial Investments 111,299 92,515 20Affiliates 220 220 0Real Estate 937 848 10Total 112,456 93,583 20



Information on Financial Structure

Summary Financial HighlightsFinancial Highlights (TL thousand) 2016 2015(*) 2014 2013 2012Total Premium Production 1,035,484 757,404 537,815 470,364 395,170

Total Assets 1,179,576 826,832 624,151 505,381 381,996

Claims Paid 421,475 296,998 218,583 191,703 163,991

Paid-in Capital 129,000 94,000 94,000 70,000 70,000

Shareholders’ Equity 207,177 185,375 178,449 163,976 90,405

Technical Profit (Technical Division Balance) (12,408) 8,731 11,117 46,102 16,674

Pretax Profit 32,525 24,607 56,539 52,839 16,265

Net Profit 22,002 24,607 45,968 42,248 15,445

Capital Adequacy Ratios 2016 2015(*) 2014 2013 2012Written Premiums/Shareholders’ Equity 5.00 4.09 3.01 2.87 4.37

Shareholders’ Equity/Total Assets 0.18 0.22 0.29 0.32 0.24

Shareholders’ Equity/Technical Provisions 0.25 0.35 0.49 0.65 0.38

Asset Quality and Liquidity Ratios 2016 2015(*) 2014 2013 2012Liquid Assets/Total Assets 0.79 0.76 0.80 0.68 0.77

Liquidity Ratio 0.98 1.01 1.15 1.04 1.04

Current Ratio 1.22 1.33 1.41 1.38 1.32

Premium and Reinsurance Receivables/Total Assets 0.13 0.14 0.10 0.14 0.11

Receivables from Agencies/Shareholders’ Equity 0.22 0.28 0.29 0.35 0.36

Operational Ratios 2016 2015(*) 2014 2013 2012Retention Ratio 0.78 0.74 0.68 0.64 0.69

Claims Payment Ratio 0.43 0.51 0.49 0.57 0.63

Profitability Ratios 2016 2015(*) 2014 2013 2012Loss-Premium Ratio (gross) 0.74 0.64 0.61 0.52 0.59

Combined Ratio (Loss-Premium Ratio (net) + Cost Ratio) 1.08 1.05 1.02 0.89 0.96

Loss-Premium Ratio (net) 0.82 0.75 0.75 0.63 0.67

Cost Ratio 0.26 0.29 0.27 0.26 0.30

Pretax Profit/Written Premiums 0.03 0.03 0.11 0.11 0.04

Technical Profit (Technical Division Balance)/Written Premiums (0.01) 1.15 0.02 0.10 0.04



Halk Sigorta Anonim Şirketi

(Currency: Turkish Lira (TL))

Balance Sheetas of 31 December 2016

ASSETS

I- Current Assets

Audited Current Period

31 December 2016

Audited Prior Period

31 December 2015 (*)

A- Cash and Cash Equivalents 824,724,705 537,535,2121- Cash - -2- Cheques Received - -3- Banks 711,469,890 460,953,2694- Cheques Given and Payment Orders - -5- Bank Guaranteed Credit Card Receivables with Maturities Less Than Three Months 113,254,815 76,581,9436- Other Cash and Cash Equivalents -B- Financial Assets and Financial Investments with Risks on Policyholders 111,298,992 92,514,6581- Available-for-Sale Financial Assets 4,395 4,2022- Held to Maturity Investments 105,321,610 82,251,5863- Financial Assets Held for Trading 5,972,987 10,258,8704- Loans and Receivables - -5- Provision for Loans and Receivables - -6- Financial Investments with Risks on Saving Life Policyholders - -7- Company’s Own Equity Shares - -8- Diminution in Value of Financial Investments - -C- Receivables from Main Operations 154,516,607 117,562,9581- Receivables from Insurance Operations 161,332,980 119,214,8892- Provision for Receivables from Insurance Operations (8,554,316) (3,593,799)3- Receivables from Reinsurance Operations - -4- Provision for Receivables from Reinsurance Operations - -5- Cash Deposited to Insurance and Reinsurance Companies - (141)6- Loans to the Policyholders - -7- Provision for Loans to the Policyholders - -8- Receivables from Individual Pension Operations - -9- Doubtful Receivables from Main Operations 29,783,725 26,521,78210- Provision for Doubtful Receivables from Main Operations (28,045,782) (24,579,773)D- Due from Related Parties 13,893 13,8931- Due from Shareholders - -2- Due from Associates - -3- Due from Subsidiaries - -4- Due from Joint Ventures - -5- Due from Personnel - -6- Due from Other Related Parties 13,893 13,8937- Rediscount on Receivables from Related Parties - -8- Doubtful Receivables from Related Parties - -9- Provision for Doubtful Receivables from Related Parties - -E- Other Receivables (5,161,857) (486,593)1- Finance Lease Receivables - -2- Unearned Finance Lease Interest Income - -3- Deposits and Guarantees Given 558,109 533,8984- Other Miscellaneous Receivables (5,719,966) (1,020,491)5- Rediscount on Other Miscellaneous Receivables - -6- Other Doubtful Receivables - -7- Provision for Other Doubtful Receivables - -F- Prepaid Expenses for Next Months and Income Accruals 79,919,908 64,790,3331- Deferred Production Charges 78,958,892 64,135,6832- Accrued Interest and Rental Income - -3- Income Accruals 116,780 46,9254- Other Prepaid Expenses 844,236 607,725G- Other Current Assets 31,796 7,708,1411- Stocks to be Used in the Following Months - 168,2622- Prepaid Taxes and Funds - 7,517,3153- Deferred Tax Assets - -4- Job Advances - -5- Advances Given to Personnel - -6- Inventory Count Differences - -7- Other Miscellaneous Current Assets 31,796 22,5648- Provision for Other Current Assets - -I- Total Current Assets 1,165,344,044 819,638,602






ASSETS

II- Non-Current Assets


31 December 2016



A- Receivables from Main Operations - -1- Receivables from Insurance Operations - -2- Provision for Receivables from Insurance Operations - -3- Receivables from Reinsurance Operations - -4- Provision for Receivables from Reinsurance Operations - -5- Cash Deposited for Insurance and Reinsurance Companies - -6- Loans to the Policyholders - -7- Provision for Loans to the Policyholders - -8- Receivables from Individual Pension Business - -9- Doubtful Receivables from Main Operations - -10- Provision for Doubtful Receivables from Main Operations - -B- Due from Related Parties - -1- Due from Shareholders - -2- Due from Associates - -3- Due from Subsidiaries - -4- Due from Joint Ventures - -5- Due from Personnel - -6- Due from Other Related Parties - -7- Rediscount on Receivables from Related Parties - -8- Doubtful Receivables from Related Parties - -9- Provision for Doubtful Receivables from Related Parties - -C- Other Receivables 793,847 879,2601- Finance Lease Receivables - -2- Unearned Finance Lease Interest Income - -3- Deposits and Guarantees Given 793,847 879,2604- Other Miscellaneous Receivables - -5- Rediscount on Other Miscellaneous Receivables - -6- Other Doubtful Receivables - -7- Provision for Other Doubtful Receivables - -D- Financial Assets 220,125 220,1251- Investments in Equity Shares 220,125 220,1252- Investments in Associates - -3- Capital Commitments to Associates - -4- Investments in Subsidiaries - -5- Capital Commitments to Subsidiaries - -6- Investments in Joint Ventures - -7- Capital Commitments to Joint Ventures - -8- Financial Assets and Financial Investments with Risks on Policyholders - -9- Other Financial Assets - -10- Impairment in Value of Financial Assets - -






ASSETS

II- Non-Current Assets


31 December 2016



E- Tangible Assets 1,944,060 2,471,3111- Investment Properties 937,070 848,465

2- Impairment for Investment Properties - -

3- Owner Occupied Property - -

4- Machinery and Equipments 225,004 225,004

5- Furniture and Fixtures 6,241,057 6,043,697

6- Land Vehicles 11,550 11,550

7- Other Tangible Assets (Including Leasehold Improvements) 872,989 976,247

8- Tangible Assets Acquired Through Finance Leases - -

9- Accumulated Depreciation (6,343,610) (5,633,652)

10- Advances Paid for Tangible Assets (Including Construction in Progress) - -

F- Intangible Assets 3,163,042 3,622,6631- Rights - -

2- Goodwill - -

3- Pre-operating Expenses - -

4- Research and Development Costs - -

6- Other Intangible Assets 13,352,016 11,530,957

7- Accumulated Amortization (10,188,974) (7,908,294)

8- Advances Paid for Intangible Assets - -

G- Prepaid Expenses and Income Accruals - -1- Prepaid Expenses - -

2- Income Accruals - -

3- Other Prepaid Expenses and Income Accruals - -

H- Other Non-Current Assets 8,110,634 -1- Effective Foreign Currency Accounts - -

2- Foreign Currency Accounts - -

3- Stocks to be Used in the Following Years - -

4- Prepaid Taxes and Funds - -

5- Deferred Tax Assets 8,110,634 -

6- Other Miscellaneous Non-Current Assets - -

7- Amortization on Other Non-Current Assets - -

8- Provision for Other Non-Current Assets - -

II- Total Non-Current Assets 14,231,708 7,193,359Total Assets 1,179,575,752 826,831,961






LIABILITIES

III- Short-Term Liabilities


31 December 2016



A- Financial Liabilities - -1- Borrowings from Financial Institutions - -2- Finance Lease Liabilities - -3- Deferred Leasing Costs - -4- Current Portion of Long Term Debts - -5- Principal Installments and Interests on Bonds Issued - -6- Other Financial Assets Issued - -7- Valuation Differences of Other Financial Assets Issued - -8- Other Financial Liabilities - -B- Payables Arising from Main Operations 41,594,118 40,027,7801- Payables Arising from Insurance Operations 41,593,977 40,027,7802- Payables Arising from Reinsurance Operations - -3- Cash Deposited by Insurance and Reinsurance Companies 141 -4- Payables Arising from Individual Pension Business - -5- Payables Arising from Other Main Operations - -6- Discount on Payables from Other Main Operations - -C- Due to Related Parties 1,601,411 1,838,0341- Due to Shareholders 1,562,084 1,789,2332- Due to Associates - -3- Due to Subsidiaries - -4- Due to Joint Ventures - -5- Due to Personnel 39,327 48,8016- Due to Other Related Parties - -D- Other Payables 46,868,794 25,044,3011- Deposits and Guarantees Received 1,034,605 808,2482- Other Miscellaneous Payables 26,601,751 13,321,5203- Discount on Other Miscellaneous Payables - -4- Payables to Social Security Institution 19,232,438 10,914,533E- Insurance Technical Provisions 834,529,214 527,497,5631- Reserve for Unearned Premiums - Net 386,685,120 305,003,5572- Reserve for Unexpired Risks - Net 6,060,931 -3- Life Mathematical Provisions - Net - -4- Provision for Outstanding Claims - Net 441,783,163 222,494,0065- Provision for Bonus and Discounts - Net - -6- Provision for Investment Risk at Life Insurance Policyholders - Net - -7- Other Technical Provisions - Net - -F- Provisions for Taxes and Other Similar Obligations 12,458,492 13,901,1431- Taxes and Funds Payable 11,406,536 9,661,5282- Social Security Premiums Payable 847,600 356,4553- Overdue, Deferred or By Installment Taxes and Other Liabilities - -4- Other Taxes and Similar Payables - -5- Corporate Tax Payable and Provision for other Legal Liabilities 18,982,461 3,883,1606- Prepaid Taxes and Other Liabilities Regarding Current Period Income (18,778,105) -7- Provisions for Other Taxes and Similar Liabilities - -G- Provisions for Other Risks 953,447 744,0611- Provision for Employee Termination Benefits - -2- Provision for Pension Fund Deficits - -3- Provisions for Costs 953,447 744,061H- Deferred Income and Expense Accruals 17,494,508 14,346,7681- Deferred Commission Income 15,088,535 12,307,3702- Expense Accruals 2,405,973 2,039,3983- Other Deferred Income and Expense Accruals - -I- Other Short-Term Liabilities - -1- Deferred Tax Liabilities - -2- Inventory Count Differences - -3- Other Various Short-Term Liabilities - -III - Total Short-Term Liabilities 955,499,984 623,399,650






LIABILITIES

IV- Long-Term Liabilities


31 December 2016



A- Financial Liabilities - -1- Borrowings from Financial Institutions - -2- Finance Lease Liabilities - -3- Deferred Leasing Costs - -4- Bonds Issued - -5- Other Financial Assets Issued - -6- Valuation Differences of Other Financial Assets Issued - -7- Other Financial Liabilities - -B- Payables Arising from Main Operations - -1- Payables Arising from Insurance Operations - -2- Payables Arising from Reinsurance Operations - -3- Cash Deposited by Insurance and Reinsurance Companies - -4- Payables Arising from Individual Pension Business - -5- Payables Arising from Other Operations - -6- Discount on Payables from Other Operations - -C- Due to Related Parties - -1- Due to Shareholders - -2- Due to Associates - -3- Due to Subsidiaries - -4- Due to Joint Ventures - -5- Due to Personnel - -6- Due to Other Related Parties - -D- Other Payables - -1- Deposits and Guarantees Received - -2- Other Miscellaneous Payables - -3- Discount on Other Miscellaneous Payables - -4- Medical Treatment Payables to the Social Security Institution - -E- Insurance Technical Provisions 10,105,049 7,689,5461- Reserve for Unearned Premiums - Net - -2- Reserve for Unexpired Risks - Net - -3- Life Mathematical Provisions - Net - -4- Provision for Outstanding Claims - Net - -5- Provision for Bonus and Discounts - Net - -6- Provision for Investment Risk at Life Insurance Policyholders - Net - -7- Other Technical Provisions - Net 10,105,049 7,689,546F- Other Liabilities and Relevant Accruals 3,706,529 3,534,7771- Other Liabilities - -2- Overdue, Deferred or By Installment Taxes and Other Liabilities - -3- Other Liabilities and Expense Accruals 3,706,529 3,534,777G- Provisions for Other Risks 3,086,938 2,360,7671- Provision for Employee Termination Benefits 3,086,938 2,360,7672- Provision for Pension Fund Deficits - -H- Deferred Income and Expense Accruals - -1- Deferred Income - -2- Expense Accruals - -3- Other Deferred Income and Expense Accruals - -I- Other Long-Term Liabilities - 4,471,7701- Deferred Tax Liabilities - 4,471,7702- Other Long-Term Liabilities - -IV- Total Long-Term Liabilities 16,898,516 18,056,860






EQUITY

V- Equity


31 December 2016



A- Paid in Capital 129,000,000 94,000,0001- (Nominal) Capital 129,000,000 94,000,000

2- Unpaid Capital - -

3- Positive Capital Restatement Differences - -

4- Negative Capital Restatement Differences - -

5- Register in Progress Capital - -

B- Capital Reserves 95,152 95,1521- Share Premiums 95,152 95,152

2- Cancellation Profits of Equity Shares - -

3- Profit on Asset Sales That Will Be Transferred to Capital - -

4- Currency Translation Adjustments - -

5- Other Capital Reserves - -

C- Profit Reserves 17,287,423 44,153,7541- Legal Reserves 10,612,987 9,916,304

2- Statutory Reserves - -

3- Extraordinary Reserves 267,113 27,630,139

4- Special Funds - -

5- Revaluation of Financial Assets 2,466 2,273

6- Other Profit Reserves 6,404,857 6,605,038

D- Retained Earnings 38,792,887 22,519,2821- Retained Earnings 38,792,887 22,519,282

E- Accumulated Losses - -1- Accumulated Losses - -

F- Net Profit / (loss) for the Period 22,001,790 24,607,2631- Net Profit for the Period 22,001,790 24,607,263

2- Net Loss for the Period - -

2- Profit not Available for Distribution - -

V- Total Equity 207,177,252 185,375,451Total Equity and Liabilities 1,179,575,752 826,831,961





Statement of Income for the Year Ended 31 December 2016

I- TECHNICAL SECTION


31 December 2016



A- Non-Life Technical Income 766,520,737 466,732,3441- Earned Premiums (Net of Reinsurer Share) 720,254,217 439,747,2221.1- Written Premiums (Net of Reinsurer Share) 807,996,711 560,071,3381.1.1- Written Premiums, gross 1,035,484,162 757,403,6731.1.2- Written Premiums, ceded (168,838,649) (154,706,760)1.1.3- Premiums Transferred to Social Security Institutions (58,648,802) (42,625,575)1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) (81,681,563) (120,324,116)1.2.1- Reserve for Unearned Premiums, gross (88,912,076) (138,503,970)1.2.2- Reserve for Unearned Premiums, ceded 5,076,878 5,935,3641.2.3 - Reserve for Unearned Premiums, Social Security Institution Share 2,153,635 12,244,4901.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) (6,060,931) -1.3.1- Reserve for Unexpired Risks, gross (7,142,482) -1.3.2- Reserve for Unexpired Risks, ceded 1,081,551 -2- Investment Income - Transferred from Non-Technical Section 31,012,633 22,100,4223- Other Technical Income (Net of Reinsurer Share) 953,289 (5,572)3.1- Other Technical Income, gross 953,289 (5,572)3.2- Other Technical Income, ceded - -4- Accrued Salvage and Subrogation Income 14,300,598 4,890,272B- Non-Life Technical Expense (778,928,271) (458,000,899)1- Incurred Claims (Net of Reinsurer Share) (588,333,529) (331,589,822)1.1- Claims Paid (Net of Reinsurer Share) (369,044,371) (253,847,420)1.1.1- Claims Paid, gross (421,475,321) (296,997,986)1.1.2- Claims Paid, ceded 52,430,950 43,150,5661.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (219,289,158) (77,742,402)1.2.1- Change in Provisions for Outstanding Claims, gross (275,745,444) (87,965,406)1.2.2- Change in Provisions for Outstanding Claims, ceded 56,456,286 10,223,0042- Change in Provision for Bonus and Discounts (Net of Reinsurer Share and Less the Amounts Carried Forward) - -2.1- Provision for Bonus and Discounts, gross - -2.2- Provision for Bonus and Discounts, ceded - -3- Change in Other Technical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) (2,415,503) (2,225,309)4- Operating Expenses (170,786,673) (111,830,973)5- Change in Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) - -5.1- Change in Mathematical Provisions, gross - -5.2 - Change in Mathematical Provisions, ceded - -6- Change in Other Technical Provisions (Net of Reinsurer and Less the Amounts Carried Forward) (17,392,566) (12,354,795)6.1- Change in Other Technical Provisions, gross (17,392,566) (12,354,795)6.2- Change in Other Technical Provisions, ceded - -C- Net Technical Income-Non-Life (A - B) (12,407,534) 8,731,445D- Life Technical Income - -1- Earned Premiums (Net of Reinsurer Share) - -1.1- Written Premiums (Net of Reinsurer Share) - -1.1.1- Written Premiums, gross - -1.1.2- Written Premiums, ceded - -1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Share and Less the Amounts Carried Forward) - -1.2.1- Reserve for Unearned Premiums, gross - -1.2.2- Reserve for Unearned Premiums, ceded - -1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) - -1.3.1- Reserve for Unexpired Risks, gross - -1.3.2- Reserve for Unexpired Risks, ceded - -2- Investment Income - -3- Unrealized Gains on Investments - -4- Other Technical Income (Net of Reinsurer Share) - -4.1- Other Technical Income, gross - -4.2- Other Technical Income, ceded - -5- Accrued Salvage Income - -






I- TECHNICAL SECTION


31 December 2016



E- Life Technical Expense - -1- Incurred Claims (Net of Reinsurer Share) - -1.1- Claims Paid (Net of Reinsurer Share) - -1.1.1- Claims Paid, gross - -1.1.2- Claims Paid, ceded - -1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) - -1.2.1- Change in Provisions for Outstanding Claims, gross - -1.2.2- Change in Provisions for Outstanding Claims, ceded - -2- Change in Provision for Bonus and Discounts (Net of Reinsurer Share and Less the Amounts Carried Forward) - -2.1- Provision for Bonus and Discounts, gross - -2.2- Provision for Bonus and Discounts, ceded - -3- Change in Life Mathematical Provisions (Net of Reinsurance) - -3.1- Mathematical Reserves (Life) - -3.2- Retrocessionaires’ Share in Mathematical Reserves (Life) - -4- Change in Provision for Investment Risk at Life Insurance Policyholders (Net of Reinsurance) - -4.1- Provision for Investment Risk at Life Insurance Policyholders - -4.2- Retrocessionaires’ Share in Provision for Investment Risk at Life Insurance Policyholders - -5- Change in Other Technical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) - -6- Operating Expenses - -7- Investment Expenses - -8- Unrealized Losses on Investments - -9- Investment Income Transferred to the Non-Life Technical Section - -F- Net Technical Income- Life (D - E) - -G- Pension Business Technical Income - -1- Fund Management Income - -2- Management Fee - -3- Entrance Fee Income - -4- Management Expense Charge in case of Suspension - -5- Income from Private Service Charges - -6- Increase in Value of Capital Allowances Given as Advance - -7- Other Technical Expense - -H- Pension Business Technical Expense - -1- Fund Management Expense - -2- Decrease in Value of Capital Allowances Given as Advance - -3- Operating Expenses - -4- Other Technical Expenses - -I- Net Technical Income - Pension Business (G - H) - -






I- NON-TECHNICAL SECTION


31 December 2016



C- Net Technical Income - Non-Life (A-B) (12,407,534) 8,731,445F- Net Technical Income - Life (D-E) - -I - Net Technical Income - Pension Business (G-H) - -J- Total Net Technical Income (C+F+I) (12,407,534) 8,731,445K- Investment Income 84,438,199 58,084,7211- Income from Financial Assets 68,645,639 41,775,2592- Income from Disposal of Financial Assets 7,196,067 4,090,1343- Valuation of Financial Assets 2,158,536 2,994,1224- Foreign Exchange Gains 6,364,339 8,524,7285- Income from Associates - 271,8316- Income from Subsidiaries and Joint Ventures - -7- Income from Property, Plant and Equipment 40,492 177,8988- Income from Derivative Transactions 33,126 250,7499- Other Investments - -10- Income Transferred from Life Section - -L- Investment Expense (37,577,697) (31,186,681)1- Investment Management Expenses (inc. interest) (153,060) (142,845)2- Diminution in Value of Investments - -3- Loss from Disposal of Financial Assets (154,319) (143,217)4- Investment Income Transferred to Non-Life Technical Section (31,012,633) (22,100,422)5- Loss from Derivative Transactions - -6- Foreign Exchange Losses (3,130,554) (5,888,993)7- Depreciation and Amortization Expenses (3,127,131) (2,911,204)8- Other Investment Expenses - -M- Income and Expenses From Other and Extraordinary Operations (1,927,830) (7,139,062)1- Provisions (5,273,076) (4,836,717)2- Rediscounts 64,238 (476,950)3- Specified Insurance Accounts - -4- Monetary Gains and Losses - -5- Deferred Taxation (Deferred Tax Assets) 4,073,246 -6- Deferred Taxation (Deferred Tax Liabilities) - (2,052,328)7- Other Income 344,252 383,9128- Other Expenses and Losses (1,136,490) (156,979)9- Prior Year’s Income - -10- Prior Year’s Expenses and Losses - -N- Net Profit for the Period 22,001,790 24,607,2631- Profit for the Period 32,525,138 28,490,4232- Corporate Tax Provision and Other Fiscal Liabilities (10,523,348) (3,883,160)3- Net Profit for the Period 22,001,790 24,607,2634- Monetary Gains and Losses - -





Statement of Cash Flows for the Year Ended 31 December 2016


31 December 2016



A - Cash flows from operating activities1- Cash provided from insurance activities 1,090,434,598 813,269,9492- Cash provided from reinsurance activities - -3- Cash provided from private pension business - -4- Cash used in insurance activities (937,429,383) (719,788,729)5- Cash used in reinsurance activities - -6- Cash used in individual pension business - -7- Cash provided by operating activities 153,005,215 93,481,2208- Interest paid - -9- Income taxes paid (7,377,630) (12,529,905)10- Other cash inflows 30,832,853 13,471,21511- Other cash outflows - (564,069)12- Net cash provided by operating activities 176,460,438 93,858,461

B. CASH FLOWS FROM INVESTING ACTIVITIES - -1- Proceeds from disposal of tangible assets 176,286 279,7052- Acquisition of tangible assets (2,176,051) (2,902,090)3- Acquisition of financial assets (232,173,055) (117,974,597)4- Proceeds from disposal of financial assets 221,365,059 105,239,8485- Interests received 75,841,705 48,859,5156- Dividends received - -7- Other cash inflows 6,452,660 8,673,6708- Other cash outflows (3,437,933) (12,620,835)9- Net cash provided by investing activities 66,048,671 29,555,216

C. CASH FLOWS FROM FINANCING ACTIVITIES - -1- Equity shares issued - -2- Cash provided from loans and borrowings - -3- Finance lease payments - -4- Dividends paid - (39,953,839)5- Other cash inflows - -6- Other cash outflows - -7- Net cash used in financing activities - (39,953,839)

D. EFFECT OF EXCHANGE RATE FLUCTUATIONS ON CASH AND CASH EQUIVALENTS - -

E- Net increase in cash and cash equivalents 242,509,109 83,459,838F- Cash and cash equivalents at the end of the year 458,226,816 374,766,978G- Net increase in cash and cash equivalents 700,735,925 458,226,816





Statement of Changes in Equity for the Year Ended 31 December 2016

Audited Statement of Changes in Equity - 31 December 2015

Paid-in Capital

Own Shares of the

Company

Revaluation of Financial

AssetsInflation

Adjustments

Currency Translation

Adjustments Legal ReservesShare Issuance

PremiumsOther Reserves and

Retained EarningsNet Profit for the

YearPrior period Profits/

(Losses) TotalI - Balance at the end of the previous year - 31 December 2014 94,000,000 - 248,325 - - 3,902,540 95,152 34,235,534 45,967,603 - 178,449,154II - Changes in the Accounting Policy(*) - - - - - - - - - 22,519,282 22,519,282III - New Balance (I + II) (01.01.2015) 94,000,000 - 248,325 - - 3,902,540 95,152 34,235,534 45,967,603 22,519,282 200,968,436A- Capital increase - - - - - - - - - - -

1- In cash - - - - - - - - - - -2- From reserves - - - - - - - - - - -

B- Purchase of own shares - - - - - - - - - - -C- Gains or losses that are not included in the statement of income - - - - - - - (357) - - (357)D- Change in the value of financial assets - - (246,052) - - - - - - - (246,052)E- Currency translation adjustments - - - - - - - - - - -F- Other gains or losses - - - - - - - - - - -G- Inflation adjustment differences - - - - - - - - - - -H- Net profit/(loss) for the period - - - - - - - - 24,607,263 - 24,607,263I- Other Reserves and transfers to reserves from undistributed dividends - - - - - 6,013,764 - - (6,013,764) - -J- Dividends paid - - - - - - - - (39,953,839) - (39,953,839)II - Balance at the end of the period - 31 December 2015 94,000,000 - 2,273 - - 9,916,304 95,152 34,235,177 24,607,263 22,519,282 185,375,451


Paid-in Capital

Own Shares of the

Company


AssetsInflation

Adjustments






(Losses) TotalI - Balance at the end of the previous year - 31 December 2015 94,000,000 - 2,273 - - 9,916,304 95,152 34,235,177 24,607,263 22,519,282 185,375,451II - Changes in the Accounting Policy - - - - - - - - - - -III - New Balance (I + II) (01.01.2016) 94,000,000 - 2,273 - - 9,916,304 95,152 34,235,177 24,607,263 22,519,282 185,375,451A- Capital increase 35,000,000 - - - - - - (27,500,000) (7,500,000) - -

1- In cash - - - - - - - - - - -2- From reserves 35,000,000 - - - - - - (27,500,000) (7,500,000) - -

B- Purchase of own shares - - - - - - - - - - -C- Gains or losses that are not included in the statement of income - - - - - - - (200,182) - - (200,182)D- Change in the value of financial assets - - 193 - - - - - - - 193E- Currency translation adjustments - - - - - - - - - - -F- Other gains or losses - - - - - - - - - - -G- Inflation adjustment differences - - - - - - - - - - -H- Net profit/(loss) for the period - - - - - - - - 22,001,790 - 22,001,790I- Other Reserves and transfers to reserves from undistributed dividends - - - - - 696,683 136,975 (17,107,263) 16,273,605 -J- Dividends paid - - - - - - - - - - -II - Balance at the end of the period - 31 December 2016 129,000,000 - 2,466 - - 10,612,987 95,152 6,671,970 22,001,790 38,792,887 207,177,252




Paid-in Capital

Own Shares of the

Company


AssetsInflation

Adjustments






(Losses) TotalI - Balance at the end of the previous year - 31 December 2014 94,000,000 - 248,325 - - 3,902,540 95,152 34,235,534 45,967,603 - 178,449,154II - Changes in the Accounting Policy(*) - - - - - - - - - 22,519,282 22,519,282III - New Balance (I + II) (01.01.2015) 94,000,000 - 248,325 - - 3,902,540 95,152 34,235,534 45,967,603 22,519,282 200,968,436A- Capital increase - - - - - - - - - - -

1- In cash - - - - - - - - - - -2- From reserves - - - - - - - - - - -

B- Purchase of own shares - - - - - - - - - - -C- Gains or losses that are not included in the statement of income - - - - - - - (357) - - (357)D- Change in the value of financial assets - - (246,052) - - - - - - - (246,052)E- Currency translation adjustments - - - - - - - - - - -F- Other gains or losses - - - - - - - - - - -G- Inflation adjustment differences - - - - - - - - - - -H- Net profit/(loss) for the period - - - - - - - - 24,607,263 - 24,607,263I- Other Reserves and transfers to reserves from undistributed dividends - - - - - 6,013,764 - - (6,013,764) - -J- Dividends paid - - - - - - - - (39,953,839) - (39,953,839)II - Balance at the end of the period - 31 December 2015 94,000,000 - 2,273 - - 9,916,304 95,152 34,235,177 24,607,263 22,519,282 185,375,451


Paid-in Capital

Own Shares of the

Company


AssetsInflation

Adjustments






(Losses) TotalI - Balance at the end of the previous year - 31 December 2015 94,000,000 - 2,273 - - 9,916,304 95,152 34,235,177 24,607,263 22,519,282 185,375,451II - Changes in the Accounting Policy - - - - - - - - - - -III - New Balance (I + II) (01.01.2016) 94,000,000 - 2,273 - - 9,916,304 95,152 34,235,177 24,607,263 22,519,282 185,375,451A- Capital increase 35,000,000 - - - - - - (27,500,000) (7,500,000) - -

1- In cash - - - - - - - - - - -2- From reserves 35,000,000 - - - - - - (27,500,000) (7,500,000) - -

B- Purchase of own shares - - - - - - - - - - -C- Gains or losses that are not included in the statement of income - - - - - - - (200,182) - - (200,182)D- Change in the value of financial assets - - 193 - - - - - - - 193E- Currency translation adjustments - - - - - - - - - - -F- Other gains or losses - - - - - - - - - - -G- Inflation adjustment differences - - - - - - - - - - -H- Net profit/(loss) for the period - - - - - - - - 22,001,790 - 22,001,790I- Other Reserves and transfers to reserves from undistributed dividends - - - - - 696,683 136,975 (17,107,263) 16,273,605 -J- Dividends paid - - - - - - - - - - -II - Balance at the end of the period - 31 December 2016 129,000,000 - 2,466 - - 10,612,987 95,152 6,671,970 22,001,790 38,792,887 207,177,252





Profit Distribution Table for the Year Ended 31 December 2016




31 December 2015 I. PROFIT DISTRIBUTION1.1. CURRENT YEAR PROFIT 28,451,892 10,200,7461.2 TAX AND FUNDS PAYABLE (6,450,102) (1,867,088)

1.2.1. Corporate Income Tax (Income Tax) (10,523,348) (3,883,160)1.2.2. Income tax deduction - -1.2.3. Other taxes and Duties 4,073,246 2,016,072

A NET PROFIT (1.1 - 1.2) 22,001,790 8,333,6581.3. PREVIOUS PERIOD LOSSES (-) - -1.4. FIRST LEGAL RESERVE 416,6831.5. STATUTORY FUND (-) - -B NET PROFIT DISTRIBUTION [(A-(1.3 + 1.4 + 1.5)] - 7,916,9751.6. FIRST DIVIDEND TO SHAREHOLDERS (-) - -

1.6.1. Holders of shares 7,500,0001.6.2. Holders of Preferred shares - -1.6.3. Holders of Redeemed shares - -1.6.4. Holders of Participation Bond - -1.6.5. Holders of Profit and Loss sharing certificate - -

1.7. DIVIDEND TO PERSONNEL (-) - -1.8. DIVIDEND TO FOUNDING SHAREHOLDERS (-) - -1.9. DIVIDENDS TO BOARD OF DIRECTORS (-) - -

1.10. SECOND DIVIDEND TO SHAREHOLDERS (-) - -1.10.1. Holders of shares - -1.10.2. Holders of Preferred shares - -1.10.3. Holders of Redeemed shares - -1.10.4. Holders of Participation Bond - -

1.10.5. Holders of Profit and Loss sharing certificate - 280,0001.11. SECOND LEGAL RESERVE (-) -1.12. STATUTORY RESERVES (-) - 136,9751.13. EXTRAORDINARY RESERVES - -1.14. OTHER RESERVES - -1.15. SPECIAL FUNDS - 27,500,000II. DISTRIBUTION OF RESERVES - 27,500,0002.1. DISTRIBUTED RESERVES - -2.2. SECOND LEGAL RESERVES (-) - -

2.3. COMMON SHARES (-) - 27,500,0002.3.1. Holders of shares - -2.3.2 Holders of Preferred shares - -2.3.3. Holders of Redeemed shares - -2.3.4 Holders of Participation Bond - -

2.3.5 Holders of Profit and Loss sharing certificate - -2.4. DIVIDENDS TO PERSONNEL (-) - -2.5. DIVIDENDS TO BOARD OF DIRECTORS (-) 0.0017 0.0019III. PROFIT PER SHARE 0.0017 0.00193.1. HOLDERS OF SHARES 0.1706 0.19083.2. HOLDERS OF SHARES (%) - -3.3. HOLDERS OF PREFERRED SHARES - -3.4. HOLDERS OF PREFERRED SHARES (%) - 0.0027IV. DIVIDEND PER SHARE - 0.00274.1. HOLDERS OF SHARES - 0.27134.2. HOLDERS OF SHARES (%) - -4.3. HOLDERS OF PREFERRED SHARES - -4.4. HOLDERS OF PREFERRED SHARES (%)

(*) Distribution of profit has not been resolved as the Annual General Meeting has not been held as of the date of writing of this report.

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Annual Report 2016 H

alk Sigorta

www.halksigorta.com.tr

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